Econometric Analysis of Central Government Debt and Economic Growth

Abstract

To deal with the negative effects of the 2008 economic crisis, China's central government has adopted a massive stimulus program of 4 trillion yuan. On the one hand, this stimulus plan ensures the smooth operation of the economy and society; on the other hand, the huge government expenditure accelerates the accumulation of government debt. This thesis aims to explain the relationship between economic growth and debt accumulation by econometric analysis. Simultaneously, this relationship is quantitatively expressed by the actual macroeconomic data from 1998 to 2018, and statistical analysis tools such as Co integration test, VEC model and impulse response function. Through the analysis of this paper, the government should take measures to encourage scientific and technological innovation to transform the mode of economic growth and development, instead of relying too much on investment and debt. Meanwhile, the pace and strength for solving the debt problem should be paid attention to avoid economic shock.